Download pdf - Financials Plummer-Moshouris 113016Fi...fleet management have driven structural gains to our margin, return, and FCF profiles, and will remain the foundation of future improvements

United Rentals, Inc., 100 First Stamford Place, Stamford, CT 06902. © 2016 United Rentals, Inc. All rights reserved.

FinancialsBill Plummer – Executive Vice President & Chief Financial OfficerIrene Moshouris – Senior Vice President, TreasurerDecember 1, 2016


Introduction

Irene MoshourisSenior Vice President, Treasurer

• Joined the company in 2006• Responsibilities include Treasury, Tax and Real Estate• Avon Products, Inc. – Deputy Treasurer• Sterling Winthrop, Inc. and Arthur Andersen & Co. –

various tax and treasury positions


(1) Principal amounts only, no discount, premium, or deferred financing included.(2) As of September 30, 2016 pro forma for the redemption of $850M of 7.625% notes due 2022 announced on October 24, 2016.

Debt Maturity Management

144 325

980

1806

569146

Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12+

625

2500

475

1925

850 800 750 750

Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12

Principal UnusedFacility

December 31, 2008 (1)

September 30, 2016 (1) (2)

Average maturity 2 years beyond 2008 levels with strong management of maturities


Interest Rate Management

7.3% 7.3%

8.1% 8.1%

6.8%6.5%

6.1%

5.4% 5.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

2008 2009 2010 2011 2012 2013 2014 2015 YTDQ3-2016

(1) Interest rate reflects annual interest expense excluding gains or losses on redemptions divided by the monthly average debt balance.

(1)

Average weighted cost of debt currently 280 bps below 2011 peak


3.1

4.8

4.0

3.33.6

3.0 2.9 2.8 2.8

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2008 2009 2010 2011 2012 2013 2014 2015 Q3-2016

Net Leverage Management

(1) Leverage Ratio calculated as total debt and QUIPs, net of cash, excluding original issuance discounts, premiums, and deferred financing divided by adjusted LTM EBITDA. (2) Pro Forma assumes RSC acquisition occurred on January 1, 2012.

(1)

(2)

TargetedNetLeverageRangeOvertheCycle:

2.5xto3.5x

Net leverage ratio trending towards lower end of targeted range


Share Repurchase Programs

0.1

0.5

1.9

1.4

2.0

3.5

1.7

2.6

1.7

2.7 2.7

2.1

106 106 106 104 10399 98

95 9491

8886

0

1

2

3

4

5

50

60

70

80

90

100

110

Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016

SharesRep

urchased

(MM)

FullyDilu

tedSharesOutstan

ding(M

M)

#SharePurchasedUnderRepurchasePrograms(R-Axis) FullyDilutedSharesOutstanding(L-Axis)

SinceOctober2013,URIhasrepurchased

22.9Msharesfor$1.8B

Fully-diluted share count down 19% since 2013


Introduction

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Bill PlummerExecutive Vice President & Chief Financial Officer

• Joined company in 2008 in current position• Responsible for Controllership, FP&A, Treasury,

Internal Audit, Investor Relations, Risk Management, Health Environmental & Safety and International Strategy Development


A few final thoughts

8

• Thinking through our Cost of Capital (WACC)• Framing ROIC, WACC and economic returns• Capital allocation and free cash generation


7.2%

0%

2%

4%

6%

8%

10%

12%

Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016

WACC Hurdle Rate

Cost of capital management

URI’s WACC has declined ~300 bps since 2014 – well below our historic hurdle rate

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7.2%

8.3%

0%

2%

4%

6%

8%

10%

12%

Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016

WACC Hurdle Rate WACC Without Share Repurchase

Cost of capital management

Share repurchases have contributed significantly to the reduction in our WACC

10


“You guys report your ROIC as 8.3% but you say your WACC is 10%. So by your own terms,

you are destroying economic value with every dollar you invest.”

A few thoughts on ROIC

Comparing ROIC to WACC is a “shortcut” around a full DCF calculation…but “shortcuts” can be dangerous when thinking about real returns!

11


Comparing ROIC to a Hurdle Rate…

…paints the wrong picture about economic profitability/ EVA

10.0%

8.3%

0%

2%

4%

6%

8%

10%

12%

Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016

Hurdle Rate ROIC

Negative Economic Profit?

12


Comparing ROIC to WACC is better…

…but that comparison still has issues

8.3%

7.2%

0%

2%

4%

6%

8%

10%

12%

Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016

ROIC WACC Hurdle Rate

Negative Economic Profit? Positive Economic Profit?

13


Issues with ROIC

Comparing ROIC to WACC is comparing “apples to oranges”

ROIC:• Is based on accounting profit

WACC:

• Assumes book value weights of debt and equity

• Is backward looking

• Covers one period

• Gives no benefit for growth

• Is used to discount cash flows

• Uses market weights for debt and equity

• Discounts the future

• Discounts all of the future

• Appropriately counts future growth

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Adjusting ROIC for market weighting…

…paints a truer picture of economic profitability

8.3%

7.2%

7.7%

0%

2%

4%

6%

8%

10%

12%

Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016

ROIC WACC Hurdle Rate Adjusted ROIC

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Note: Adjusted ROIC reflects adjustment for market weightings rather than book value weightings.


Net usesof capital

53%

15%

Net sourcesof capital

98%

2%

Historical capital allocation: Q3 2013–Q3 2016

Note: Net Debt Issuance includes cash from balance sheet and other items.

Organic investment

Strategic M&A

Return to stockholdersM

anag

e le

vera

ge ta

rget

(2

.5x–

3.5x

)

Priorities

Cash from operations

Debt issuance

Capex

Cash acquisitions

32%Share repurchases

100% equals $6.0B

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$508

$846 $335 $367

$227

$23

$(223)

$383

$557 $411

32.8%26.6%

30.9%

35.6%

42.6%46.7% 47.8% 48.7% 47.4%

0%

10%

20%

30%

40%

50%

$(300)

$(100)

$100

$300

$500

$700

$900

$1,100

$1,300

2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

Sep YTD Full Year EBITDA Margin (%)

Free

Cas

h Fl

ow ($

MM

)

Adju

sted

EBI

TDA

Mar

gin

(%)

Structurally improved free cash flow profile

…while improving margins and economic profitability

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Note: Dotted text box reflects mid-point of 2016 full-year FCF guidance.


Summary• URI’s core “Four Pillars” strategy has

served us well, delivering growth and improved profitability throughout the current cycle

• Operational excellence and disciplined fleet management have driven structural gains to our margin, return, and FCF profiles, and will remain the foundation of future improvements in our core business

• Project XL initiatives open new avenues for both growth and returns – $200MM in run rate benefit by year-end 2018

• Specialty businesses will continue to contribute strong growth and returns, targeting $2 billion in revenue by 2020

• Smart M&A represents an opportunity to turbocharge everything we do

• All will be supported by a sound, efficient capital structure and solid FCF throughout the cycle

Margin, Return, and FCF profiles structurally improved with more to come

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